The Review of Financial Studies, Vol. 21, No. 3 (May, 2008), pp. 1339-1369 (31 pages) We examine the accuracy and contribution of the Merton distance to default (DD) model, which is based on Merton's ...

In this work, we model the empirically observed recovery risk premium by adding an additional correlated risk driver to Merton’s model for pricing corporate bonds. This risk driver represents the ...

Martin Zorn, President and Chief Operating Officer of Kamakura Corporation, is the author of this note. Leading researchers in finance have been near-unanimous in their conclusion that modern "reduced ...